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498. Strategic Expansion of Freight Transportation Hub Networks under Uncertainty
Invited abstract in session MC-61: Hub Location, stream Locational Analysis.
Monday, 12:30-14:00Room: S10 (building: 101)
Authors (first author is the speaker)
| 1. | Sibel A. Alumur
|
| Department of Management Science and Engineering, University of Waterloo | |
| 2. | Hao Li
|
| Department of Management Science and Engineering, University of Waterloo | |
| 3. | Gita Taherkhani
|
| Supply Chain Management, Loyola University | |
| 4. | Mike Hewitt
|
| Loyola University Chicago |
Abstract
We focus on freight transportation carriers that transport shipments that are small relative to vehicle capacity and incur transportation costs that exhibit economies of scale. To achieve profitability, such carriers route shipments through a network of hubs. The locations of a carrier's hubs dictate the customer markets it can profitably serve. We consider a carrier that seeks to increase its profitability by growing its customer base. To do so, it seeks to expand its network into new regions by merging with carriers that already operate in those regions. We focus on how, and by how much, the network that results from such a merger should be redesigned to maximize profitability. To study this issue we present deterministic and stochastic profit-maximizing hub location models that capture the interaction between economies of scale and profitability. The models differ in whether and how they model the recognition of uncertainty in shipment sizes in the decision-making process. We perform a case study based on operations from a multi-regional less-than-truckload freight transportation carrier to derive insights into the profitability of different redesign strategies. We analyze the networks prescribed by solutions to these optimization models to derive insights into how a network that results from a merger should be redesigned. We also study how uncertainty impacts the structure of the redesigned networks.
Keywords
- Location
- Logistics
Status: accepted
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